Egypt's private sector activity contracts marginally in September as demand weakens

Confidence about 12-month outlook improves

View of the recently-constructed Al-Sahaba mosque in the Egyptian Red Sea resort city of Sharm El-Sheikh. Egypt's private sector activity slowed down marginally in September as demand weakened. AFP / Mohamed el-Shahed

Egypt's private sector activity declined marginally in September for the first time in three months as demand weakened and output dropped, according to a new survey of companies.

Non-oil business activity fell to 48.7 points in September from 50.5 in August, the Emirates NBD Egypt Purchasing Managers’ Index showed. Readings above 50 signal an expansion and below indicates contraction.

"Approximately 18 per cent of panellists registered a decline in output, which they widely linked to weak underlying demand and unfavourable market conditions," according to the report. "That said, the rate of contraction was modest."

Egypt, North Africa's largest economy, is implementing an economic reform programme backed by a $12 billion (Dh44bn) loan from the IMF since late 2016. Under the programme, the country made deep cuts to energy subsidies, introduced new taxes and floated the currency with the intention to overhaul the economy, boost investor confidence and restore stability to capital markets.

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New business orders placed with firms declined in September for the first time in three months because of weak market demand but the rate of decline was "modest", the survey showed.

New export orders also declined due to reduced international demand for Egyptian goods but the rate of decline was marginal.

Companies reported a rise in purchase prices mainly because higher fuel costs drove purchase costs, the report said.

However, the rate of input cost inflation dropped from July's recent high and was below the historical average levels.

Still, firms are optimistic about the outlook for the next 12 months as they hoped the volume of output would be stable. However, the latest reading remains below the historical average, indicating that optimism is subdued among private sector firms.

The survey is sponsored by Dubai's biggest lender, Emirates NBD, and produced by IHS Market.